You're probably going to hear a lot about the border adjustment tax in the coming weeks as the debate over a sweeping Republican tax reform plan heats up and powerful corporations line up on both sides to wage battle.

Border adjustment, say opponents such as Wegmans, Target and Best Buy, unfairly penalizes importers and is going to jack up the price you pay at the register.

Hold on, say supporters such as Chicago-based airplane manufacturer Boeing and Pfizer, a major drug company with offices in Montgomery County: It's going to give a boost to domestic manufacturers, keeping U.S. companies from leaving and creating new jobs.

The "border adjustment tax" isn't actually a tax, it's a new approach to taxing corporate income that is officially known as the "destination-based cash flow tax." In shorthand, it would subject imported goods to federal tax, while exempting exported goods.

It's critical to House Republicans' tax reform plan because it fills a $1 trillion gap created by dropping the corporate income tax rate from 35 percent to 20 percent. Without it deep, politically untenable spending cuts would be required to avoid super-sizing the federal deficit.

Big retailers aren't the only ones lining up against border adjustment.

Joe Rudderow III has owned and operated Bell Ace Hardware in Trexlertown for nearly three decades, and has watched as deep-pocketed big box stores such as Home Depot and Lowe's gradually took over the hardware business and put pressure on the little guys by driving down prices.

Bell Ace Hardware sells products that are made in the USA, as well as countries such as China and Mexico. Taxing imported goods would drive costs up and put small hardware stores like his at an even larger disadvantage, he said, especially if the change is implemented too swiftly.

"I think there is going to be the usual unintended consequence of putting Main Street out of business," Rudderow said.

Large U.S. companies such as Merck & Co. and Pfizer, which have major operations in Montgomery County, are among those that support the tax. They're part of a group called the American Made Coalition, which says the plan will benefit domestic manufacturers and create an incentive for companies to keep operations and profits in the U.S.

American manufacturers are at a disadvantage, they say, because many other countries offer foreign-based corporations a similar tax break. Enacting border adjustment would level the playing field by subjecting American-made products and imports selling within the U.S. to the same tax.

"By treating all sales into the U.S. equally, creating a fully territorial system, and lowering the rate, the plan abolishes the tax premium levied on U.S. companies and enables U.S. companies to compete on a level playing field with our foreign competitors," Merck & Co. said in a statement.

Proponents dismiss retailers' price increase warnings, saying border adjustment will boost demand for U.S.-made products, which will push up the value of the dollar against foreign currencies. That, in turn, would give importers more buying power and prevent major price hikes for consumers.

Then again, perhaps it was the possibility of a major infrastructure construction program.

Whatever the reason, TorcUp founder and CEO John Kovacs...

The opposition is led by retailers and other companies that import goods into the United States, including , Bon-Ton Stores, Zulily and Rite Aid, all part of a group called Americans for Affordable Products.

They say border adjustment would force them to raise prices on imported goods, which will hit low-income families hardest. They say the dollar's future value is unpredictable, and a spike can't be counted on to offset the change.

It's easy to see why the change worries retailers. For example, Wegmans doesn't have any international sales, but it imports plenty of products — think Chilean grapes or Valbreso feta cheese from France — from other countries.

"It does vary by season," s Wegmans spokeswoman Jo Natale said. "But if you think about produce, cheese, charcuterie, even some seafood, shrimp for example. Our international aisle in the grocery department, we bring in produce from all over the world."

But they're not the only opponents. In the Lehigh Valley, Victaulic, the Forks Township-based manufacturer of grooved mechanical pipe-joining solutions, operates 14 manufacturing facilities around the world.

PHOTO GALLERY: President Donald Trump has threatened to impose a tariff on goods imported from Mexico to pay for his proposal to build a wall along the U.S. border. While the percentage of the tariff is in dispute, as well as how it would be applied, one thing is for certain – it could mean you’ll be paying more for some items in the checkout line. Here are some popular consumer goods that could increase in cost under a high tariff.

The vast majority of Victaulic products sold in the U.S. are made in the U.S., the company said, but it's still not a fan of the proposal.

"Victaulic believes there are better ways to pay for lower corporate tax rates than this proposed legislation, such as growing the economy and reducing both regulations and corporate tax loopholes," said John Malloy, Victaulic's president and CEO, in a statement.

Many local companies aren't taking sides publicly. Olympus Corp., the Japanese medical device-maker whose North and South American headquarters is in Upper Saucon Township, would only say it is willing to work with President Donald Trump and Congress on the issue. Bethlehem-based diagnostic testing company OraSure Technologies, which has a Canadian subsidiary, also declined to speculate about how it would be affected.

Martin Guitar, which has a factory in Mexico, has weighed in against Trump's proposed Mexican border tax, but hasn't taken a public position on border adjustment.

Chairman and CEO C.F. Martin IV wrote in a letter to lawmakers that his company's Sonora, Mexico factory, which makes strings and lower-priced Martin guitars, has actually led to increased employment in Upper Nazareth Township, where the company makes premium models.

"We are one company serving a large market worldwide," Martin wrote. "I care about everyone who works with me. I just wanted to let you know that I think an expensive expansion of the wall and free-trade restricting tariffs between the United States and Mexico are a bad idea."

What's the bottom line for the economy? There are dozens of experts on each side of the issue, but many economists have concluded the measure won't have the catastrophic effects on consumer prices or dramatically boost U.S. manufacturing employment the way critics and supporters have predicted.

"It's really complicated in many ways," said Veronique de Rugy, an economist at George Mason University who opposes the border adjustment tax.

Take border adjustment's effect on the dollar. If the dollar's value does increase significantly the way supporters predict and it blunts the impact on the cost of imports, it will actually hurt the companies that support the change by increasing the cost of their exports abroad.

"People are often talking from both sides of their mouth," she said.

That doesn't even take into account that currency fluctuations are difficult to predict and subject to multiple influences. It's an untested taxing structure that could have unintended consequences for the economy if implemented, and is likely to be challenged by the World Trade Organization, she said.

Nonetheless, economists at the non-partisan Tax Foundation, which supports the idea, say the border adjustment plan is an efficient way to make up for lost corporate tax revenue that doesn't create major winners and losers in the economy.

"The Tax Foundation estimates that, in the context of the House GOP tax plan, the border adjustment would raise $1.1 trillion over 10 years, and would do minimal economic harm," the group says.

There remain a lot of nitty-gritty details that need to be worked out. How would services and financial transactions be covered? What about nonprofit companies that import goods?

Legislative support for border adjustment is in flux. The concept has support in the Republican-controlled House, but the picture in the GOP-led Senate is unclear and Trump has been noncommittal.

Against that backdrop, local lawmakers also are undecided. Spokespeople for Republican Sen. Pat Toomey and U.S. Rep. Charlie Dent, R-15, said they are evaluating the proposal. A spokeswoman for Sen. Bob Casey did not respond to questions about the plan. In an email, Rep. Matt Cartwright, D-17, said the issue has some support, but needs more study.

"Companies that import part of their product or inventory might suffer large losses, and those business interests have already strongly opposed the proposal," Cartwright said. "Before deciding on a tax bill that has a border adjustment tax in it, I would want to know the full range of effects—– good and bad."

scott.kraus@mcall.com

Twitter @skraus

610-820-6745

BORDER ADJUSTMENT

A change to the corporate tax would tax products and services based on where they are consumed, not where they are produced.

•What it is: The "border adjustment tax" isn't actually a tax, it's a new approach to taxing corporate income that is officially known as the "destination-based cash flow tax." In short-hand, it would subject imported goods to federal tax, while exempting exported goods.

•Who it hurts: Retailers. They import lots of products and sell most of their goods in the U.S.